Look, no hands: Transferring the risk of autonomous technology

March 18, 2020

A few decades ago, the idea of driverless cars may have sounded like something from a sci-fi movie. But now autonomous vehicles are a reality. It is estimated that by 2026, as many as 21 million self-driving cars will be on the roads worldwide.

As tech entrepreneur Elon Musk once said: “When Henry Ford made cheap, reliable cars, people said ‘nah, what’s wrong with the horse?’ That was a huge bet he made, and it worked.”

Vehicles operating at Level 4 autonomy – capable of completing an entire journey without driver intervention but within certain constraints – are likely to be “disruptive and available” before 2022, according to a report by the McKinsey Center for Future Mobility. Meanwhile, the report predicts, fully autonomous vehicles operating at Level 5 – capable of driverless operation anywhere and at all times with no provision for human intervention such as a steering wheel, joystick or pedals – likely will arrive by 2030.

In a survey of small business owners, conducted by Renault-Nissan-Mitsubishi, 55% of respondents said they believed their fleets would be fully autonomous within 20 years. And it isn’t just in road transport that autonomy has the potential to revolutionise the way things are done. Companies across all industry types are investing heavily in autonomy. In 2018 alone, investments in autonomous technology topped $10.3 billion, according to venture capital experts Pitchfork.

Autonomous technology is being adopted in marine transport and logistics – the first autonomous ferry recently was trialled in Finland, for example. Autonomy is also being used for cranes at ports, and automated forklifts are in use in warehouses and fulfilment centres. In agriculture, autonomous machines are being used for planting and harvesting crops, and autonomous machines are used in the construction and demolition of buildings, roads and railways.

The list goes on – and is likely to expand.

Autonomous technologies are being explored, tested and used in varied industries across the world. But with these opportunities come new risks.

But as well as the large investment and expertise required in developing these technologies, there are legal and liability hurdles to overcome before autonomy becomes an even greater part of our day-to-day lives.

Regulators around the world, unsurprisingly, are insisting that autonomous vehicles undergo rigorous testing in controlled conditions and closed environments before being permitted on public roads.

For risk experts and insurers, the question of liability if something goes wrong, has been one that we have been grappling with. Who, for example, would be liable if a software error causes a problem with vehicle performance? Where would the liability lie if hackers caused an autonomous vehicle to veer off course?

At AXA XL, our involvement with several projects, most notably the DRIVEN initiative that explored vehicles driving at Level 4 autonomy, has given us valuable insights into how autonomous vehicles can be insured.

Using this knowledge, we’ve designed a multi-faceted insurance proposition that supports the design, development, testing and implementation of these technologies. The solution is aimed not only at companies that manufacture, own and operate autonomous vehicles but also the component makers and software developers that are part of this ecosystem.

The proposition applies a modular approach to risk transfer; clients can structure various insurance coverages depending on their particular needs and circumstances. For a start-up running trials in a closed environment, for instance, the programme could include a traditional casualty policy along with some first-party property components.

The policy provides a core of coverage for third-party liability, damage to property and vehicle theft. Additional coverage can be added for liability for damage in the insured’s care, custody or control; liability for damage to a trial site; cyber attack; liability for damage and/or bodily injury; trial interruption; and data restoration expenses.

We are all learning about this technology as it develops, and using the data harnessed from experiments and trials to better understand the risks and opportunities offered by autonomy.

To this end, a collaborative approach is, we believe, vital in the development of risk management and transfer strategies for autonomous technologies. We look forward to continuing to work with clients across all industry segments to better understand the risks and opportunities that autonomous technology will provide.

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